Microsoft to raise $3.75 billion from unsecured note debt

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Microsoft announced today as part of the $6 billion debt authorization approved by the company’s board back in September, 2008, that they would seek to raise $3.75 billion in senior unsecured notes. This is the first time in Microsoft’s 35-year history the company has raised funds by purchasing debt.

Microsoft will use the net proceeds for general corporate purposes, which “may include funding for working capital, capital expenditures, repurchases of stock and acquisitions” — though there are no specific or defined plans for the money.

Microsoft is expected to close all details of the note offering by next Monday, May 18, 2009. A prospectus is available from J.P. Morgan Securities, Morgan Stanley & Co, or other underwriters. The bond issue has received a triple-A rating from Moody’s Investors Service.

Rick’s Opinion
There was a lot of buzz on this news early on Monday before Microsoft officially announced. It remains unclear why Microsoft is taking on this debt at this time, though there is speculation Microsoft wants to “capitalize on its great credit rating”. Even Microsoft has not specified specific targets for this money, but only vague generalizations.

One report suggested Microsoft is making a mistake by offering up debt in the current market conditions, stating that with their assets and cash-on-hand (in excess of $25 billion, with an operating cash flow in excess of $22 billion), that they could afford to wait as long as needed to achieve better returns.